Chronic proliferative and erosive arthritis, resembling rheumatoid arthritis, can be induced in susceptible rats by systemic administration of cell wall fragments derived from a variety of bacteria. The invasive disease has many features in common with invasive tumors, in situ, the invasive lesion is composed primarily of "transformed"-appearing fibroblastlike cells, along with prominent new blood vessel development (angiogenesis). Lesser numbers of macrophages are also present. The expression of transin, MYC and SIS genes, often expressed at high levels in tumors, is also markedly enhanced in diseased synovium. In vitro, freshly explanted synovial fibroblastlike cells behave like tumor cells. They grow rapidly, do not contact inhibit, grow to high saturation densities, and form colonies when grown under anchorage- -independent conditions. These properties are stimulated by platelet derived growth factor and fibroblast growth factor, and are inhibited by transforming growth factor-beta and retinoids. The local production of platelet derived growth factor and transforming growth factor-beta by diseased synovium has been directly demonstrated. Arthritis susceptible LEW rats have been shown to have a defect in the hypothalamic-pituitary response to cell walls, that may explain their disease susceptibility. This model provides a powerful tool to investigate pathogenetic mechanisms relevant to human disease.